Gold Price in AUD in Range, Markets Risk on AND off at the Same Time?

Gold Price in AUD in Range, Markets Risk on AND off at the Same Time?

At time of writing, the gold price in AUD terms is sitting at just under $2,700 an ounce.

As you can see over the last month there was a strong rise through to 7 August, followed by a plunge, a muted recovery, and now some sideways trading:

gold

Source: tradingview.com

At the same time, US markets are hitting all-time highs. What’s going on?

Strengthening AUD hurts, markets driven by tech

You can see the Aussie dollar against the US dollar below:

gold asx

Source: tradingview.com

It has gently pushed past resistance at 70 cents.

This coincided with a weakening USD, which lit a fire under the price of gold in USD terms.

And with US indices in overdrive at the moment, it’s fair to ask what on Earth is going on?

The old narrative is gold up, stocks down and vice versa.

But with a weaker USD you are seeing gold and stocks up at the same time, which could be unnerving.

The thing to remember here is that the FAANG/FAMGA, or whatever you want to call the tech titans that make up the top-end of the NASDAQ and S&P 500 [SPX], are accounting for an outsized proportion of the increases.

So it’s a tumultuous time where distrust in fiat is growing while tech giants become a defensive play.

Does this mean the market will crash sending gold higher?

Gold price reflects risk on AND risk off thinking, currency moves and Australia’s ‘Gold Epicentre’

For the moment, it seems the market is both risk on and risk off at the same time.

However, the positions in the now defensive tech giants are far more risk off than you would think.

Which means we could see further spikes in ASX-listed gold stocks if the market discovers the money-printing machine could be turned off.

US stimulus is being held up at the moment and this could be a factor in the immediate future.

The deal will probably get over the line in my book, and this could see the US markets burst higher, potentially hurting the gold price for a time in USD terms.

That being said, after a long slide the US Dollar Index [DXY] is starting to level off after a plunge and the AUD might level off as a result:

gold 1

Source: tradingview.com

Demand for Aussie commodities remains strong and this, despite the ultra-low RBA rates, could be playing into the AUD’s push past resistance.

All up, there are an immense number of conflicting signals out there and you should wrap your head around this report if you want to understand Australia’s potential gold stock renaissance.

The country has huge reserves of the shiny metal, exploration spend is up and significant mining expertise.

Grab a copy of the ‘Gold Epicentre’ report for free right here.

Regards,

Lachlann Tierney 

For The Daily Reckoning Australia